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The agriculture sector is an important element of the global economy but accounting for its activities has had little attention from the accounting standard setters as most business applications focus on production, marketing or tax reporting. This study reviews and discusses current US and international accounting guidance for agricultural and biological assets. With the ongoing discussion between the FASB and the IASB regarding the adoption of international accounting standards, the study also explores the advantages and disadvantages should the US elect to adopt the international accounting guidance for agricultural activities.
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INTRODUCTION
Agriculture is an important sector of the global economy and has played a key role in the development of human civilization. Yet historically agricultural activities receive little, or no, attention from the accounting standard setters. This may be the result of the economy being less dependent upon agriculture than the corporate industrial and regulated industries. Prior to the farm crisis in the 1980s (Barney 2010, 8) there was no uniform system of financial reporting for agriculture producers in the United States (US). Most business applications in agriculture were focused on production, marketing, or tax reporting rather than decision-making. In fact, many aspects of generally accepted accounting principles (GAAP) accounting guidance do not apply to, or exempt, agricultural entities.
Currently there is a mix of accounting guidance for agriculture producers in the US that is both GAAP including Financial Accounting Standards Board (FASB) Codification 905 (FASB 2009a) and non-GAAP Financial Guidelines for Agricultural Producers (FGAP 1997). Should the US adopt International Financial Reporting Standards (IFRS), this guidance would be replaced with International Accounting Standard (IAS) 41 - Agriculture (IASB 2000). This exploratory study reviews and illustrates current US and international accounting recognition and reporting for agriculture producers and biological assets. The study also discusses the advantages and disadvantages of adopting the international guidance.
US AGRICULTURE ACCOUNTING RECOGNITION AND REPORTING GUIDANCE
In the 1970s, the federal government tried to offset a growing US trade deficit caused by the OPEC oil embargo by expanding agricultural sales overseas. Subsidies to overseas purchasers via loans by the Commodity Credit Corporation and the extension of credit to foreign governments by commercial banks contributed to a surge in US farm exports that went from...